Law:

Section:

Section 32, read with Section 43(1), of the Income-tax Act, 1961 - Depreciation - Allowance/rate of Assessment years 2001-02 and 2002-03 - Whether depreciation is a privilege and can only be on basis of 'actually allowed' and not 'notionally allowed' - Held, yes - Whether though statutorily Legislature can require actual cost to be computed in a particular way, yet when that is not so, assessee cannot be deprived of benefit of depreciation with respect to computation of his income, when depreciation has not been claimed by assessee in earlier years - Held, yes FACTS The assessee-company was engaged in the business of producing superior quality hybrid seeds of rice for supply to farmers. For that purpose, it was using germplasm seeds. 'Germplasm' is an expression broadly used to denote the hereditary properties of the seeds, which are transmitted from one generation to another. The germplasm seed is capable of passing on the character to the next generation and it is used as basic plant material in plant breeding. For the relevant assessment year, the assessee had claimed depreciation on the actual cost of the germplasm seeds which had been acquired in the earlier years treating the same as assets used in the business. The Assessing Officer, however, asked the assessee to submit a depreciation chart on the basis of written down value (WDV) after making notional allowance for depreciation in the earlier years. The assessee did not file any such chart and rather insisted on that the depreciation be allowed on the actual cost as no depreciation had been claimed in the earlier years. In the absence of details, the Assessing Officer disallowed the entire claim of depreciation for the assessment year 2001-02 and for the assessment year 2002-03, he allowed depreciation on the basis of written down value as per the assessment order for the assessment year 2001-02. On appeal, the Tribunal allowed the assessee's claim. On the revenue's appeal to the High Court : HELD Depreciation on an asset used for the purpose of business is allowable under the provisions of section 32 at the prescribed rate on the basis of WDV of block of assets. The actual cost has been defined in…

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